What You Need to Know
- The unregistered advisor allegedly engaged in a scheme to fraudulently obtain over $20 million from investors.
- He took client money out of the funds he managed to repay other investors, prosecutors said.
- The SEC and acting U.S. attorney for the District of New Jersey filed separate complaints.
An unregistered investment advisor and hedge fund manager pleaded guilty to one count of securities fraud for his role in a scheme to fraudulently obtain over $20 million from investors through misrepresentations about trading strategy and fund performance, according to Rachael A. Honig, acting U.S. Attorney for the District of New Jersey.
On Tuesday, George Heckler, 64, of Charleston, South Carolina, pleaded guilty by videoconference before U.S. District Judge Madeline Cox Arleo, according to Honig, who also filed a complaint against Heckler in U.S. District Court for the District of New Jersey, alleging securities fraud.
Separately, the Securities and Exchange Commission filed a complaint against Heckler on Tuesday in the same court, alleging that, between 2009 and 2019, he defrauded investors, as well as CV Special Opportunity Fund and Cassatt Short Term Trading Fund, two hedge funds he advised and controlled.
Heckler “repeatedly misled investors by telling them they were earning consistent gains while, in reality, their money had not been invested as promised (or at all), and the value of the money that had been invested was decimated by poor performing investments,” the SEC alleged.
A significant amount of investors’ funds were not invested at all or were instead used to “make Ponzi-like payments to prior investors,” according to the SEC, which is seeking to have Heckler “disgorge all ill-gotten gains or unjust enrichment with prejudgment interest” and also pay civil penalties.
According to the SEC complaint, Heckler raised at least $90 million in new investor capital through five entities he controlled, of which over $32 million was used to repay or redeem prior investors. The SEC also alleged that Heckler took over $1 million for his personal use.
Heckler managed, controlled or was involved with multiple investment funds, including Conestoga Partner Holdings, Cassatt Short Term Trading Fund, CV Special Opportunity Fund and TA1, according to Honig’s complaint.
From around 2014 to around 2018, Heckler, “willfully and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce, the mails and facilities of national securities exchanges, in connection with the purchase and sale of securities, used and employed manipulative and deceptive devices and contrivances in violation” of securities laws, according to the complaint.
Heckler allegedly “misrepresented to investors that he would invest their funds in specific trading strategies” but, “instead, he diverted their funds out of Cassatt and TA1 for purposes inconsistent with the trading strategies, including to pay out millions of dollars to other investors,” Honig alleged.